Pennsylvania does not have an estate tax. It does impose an inheritance tax, which is calculated on what each beneficiary receives rather than on the estate as a whole, at rates that run from 0% for a surviving spouse to 15% for unrelated heirs.1Department of Revenue. Inheritance Tax | Department of Revenue | Commonwealth of Pennsylvania That distinction shapes everything else about how death taxes work in the state. Two people inheriting identical amounts from the same person can owe wildly different tax because the rate depends on their relationship to the decedent, not on the size of the estate.
The Rate You Pay Depends on Who You Are
Pennsylvania’s inheritance tax rates are flat within each class of beneficiary. There are no graduated brackets and no exemption threshold that shields smaller inheritances from the tax. Even a $50,000 inheritance from a sibling is taxable.
- 0% for a surviving spouse, and 0% for a parent inheriting from a child who was 21 or younger at death.
- 4.5% for direct descendants and lineal heirs, including children, grandchildren, parents, and grandparents.
- 12% for siblings.
- 15% for everyone else, including nieces, nephews, friends, and unmarried partners.
Transfers to charitable organizations, exempt institutions, and government entities are fully exempt.1Department of Revenue. Inheritance Tax | Department of Revenue | Commonwealth of Pennsylvania
What Property Gets Taxed
For a Pennsylvania resident, nearly everything they owned is potentially taxable: real estate, vehicles, bank accounts, investment accounts, furniture, jewelry, and other tangible property in the state. Intangible property like stocks, bonds, and loans receivable is taxable regardless of where it is held, so a resident’s shares in an out-of-state company still count.1Department of Revenue. Inheritance Tax | Department of Revenue | Commonwealth of Pennsylvania
Jointly owned property with right of survivorship is taxed based on the decedent’s fractional share. Divide the total value by the number of joint owners. Joint property held between spouses is completely exempt.
Non-residents are not off the hook. If someone who lived elsewhere owned real estate or tangible personal property physically located in Pennsylvania, that property is subject to the tax, reduced by any unpaid property taxes and any debt for which the property is mortgaged or pledged. Non-resident estates file Form REV-1737-A rather than the standard REV-1500.
Exemptions and Deductions
Several items either escape the tax entirely or reduce the taxable value of the estate:
- Life insurance proceeds are exempt whether paid to a named beneficiary or to the estate itself, for deaths after December 13, 1982. If the decedent owned a policy on someone else’s life, however, the policy’s cash surrender value may be taxable.2Cornell Law School. 61 Pa Code 93.131 – Payments From Employment Benefit Plans and Life Insurance Contracts
- Certain farmland and agricultural property transferred to eligible recipients has been exempt since July 1, 2012.1Department of Revenue. Inheritance Tax | Department of Revenue | Commonwealth of Pennsylvania
- A $3,500 family exemption is available for a qualifying individual who lived with the decedent.
- Funeral costs, estate administration expenses, and debts owed by the decedent at death all reduce the taxable value.
The One-Year Lookback on Gifts
Pennsylvania has no separate gift tax, but any gift made within one year of death is pulled back into the taxable estate for inheritance tax purposes. Someone who transfers a house to a child eleven months before dying has not avoided the tax; the full value is taxed as though the gift never happened.
The same lookback applies to newly created joint interests. If the decedent added a child to a bank account or deed within the final year, the entire value of that property is taxable, not just the decedent’s fractional share.3Montgomery County, PA. Inheritance Tax for Pennsylvania Residents Gifts made more than one year before death are generally outside the tax, which makes early planning far more effective than last-minute transfers. The federal annual gift tax exclusion of $19,000 per recipient in 2026 works the same way for Pennsylvania purposes: a gift within that federal limit still gets pulled back if it happened within twelve months of death.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Filing, Deadlines, and the Early-Payment Discount
The executor or administrator files Form REV-1500 with the Register of Wills in the county where the decedent lived. The return is due nine months after the date of death.5Internal Revenue Service. REV-1500 Pennsylvania Inheritance Tax Return Checks are made payable to “Register of Wills, Agent.”
Pay within three months of the date of death and you get a 5% discount on the tax. On a $100,000 inheritance taxed at 4.5%, that discount is $225. You can prepay before the full return is ready by sending the Register of Wills the decedent’s name, date of death, and Social Security number in writing with the payment.
Miss the nine-month deadline and interest starts running. For 2026, the annual interest rate is 7%. An extension to file the return does not pause interest, which runs from the nine-month mark either way. Failure to file can also draw a penalty of 25% of the tax due or $1,000, whichever is less.
When Federal Estate Tax Still Applies
Pennsylvania does not impose its own estate tax, but the federal estate tax can still hit larger estates. For 2026, the federal exemption is $15,000,000 per individual under the One, Big, Beautiful Bill signed into law on July 4, 2025.6Internal Revenue Service. What’s New – Estate and Gift Tax A married couple can shelter up to $30,000,000 through portability, where the surviving spouse claims the unused portion of the deceased spouse’s exemption.
Estates above the exemption face federal rates starting at 18% and topping out at 40%.7Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax The executor files Form 706 with the IRS, also due nine months after death, with a six-month extension available for filing but not for payment.8Internal Revenue Service. Instructions for Form 706 (Rev. September 2025) Most Pennsylvania estates fall well under $15 million and owe no federal estate tax. The state inheritance tax has no such exemption threshold.
Stepped-Up Basis on Inherited Property
Inheriting property carries one significant federal tax benefit: your cost basis in the asset resets to its fair market value on the date of the decedent’s death.9Office of the Law Revision Counsel. 26 US Code 1014 – Basis of Property Acquired From a Decedent The step-up applies whether or not the estate files a federal estate tax return.10Internal Revenue Service. Gifts and Inheritances
Suppose a parent bought a house in 1985 for $80,000 and it is worth $400,000 when they die. Your basis is $400,000. Sell it the next month for $405,000 and you owe capital gains tax on $5,000, not on $325,000. A lifetime of unrealized gains is effectively erased. The step-up covers stocks, real estate, and most other inherited assets. It does not apply to assets given away during the decedent’s lifetime, which carry over the original basis. That difference is one more reason the choice between gifting during life and passing property at death involves more than just the Pennsylvania inheritance tax rate.